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  • Writer's pictureMike Brandly, Auctioneer

An obligation to disclose?

Auctioneers are fiduciaries for their sellers or consignees. Auctioneers owe clients (principals) obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care.

On the other hand, auctioneers do not work for bidders/buyers and rather work with them. Bidders/buyers are not clients, but customers. However, it’s clear that bidders/buyers rely on auctioneers and place their trust and confidence in what they say or don’t say.

For example, if an auctioneer says he is selling a “Rolex watch” then bidders are right to assume the subject property is indeed a Rolex watch. If this watch is actually not, or the watch case is completely empty of any workings, bidders would be right to assume such status should have been disclosed.

We wrote prior about court testimony in regard to a horse auction, where another well renowned expert witness made our same argument:

We have seen auctioneers held liable for intentionally expressed misrepresentations [suggestio falsi] (saying it’s a Rolex when it’s not) and/or omission of material information [suppressio veri] (not noting the watch case is vacant when it is.) Avoiding both is certainly advised.

In one such case in which we testified, we held that even if an auctioneer didn’t know the Rolex watch case was empty, he should know that if he’s in the business of selling Rolex watches — and maybe even if he’s not in that business specifically.

What lessens the chance any auctioneer would be held liable for selling a Rolex watch that really isn’t? If the bidders are given the chance to inspect this watch prior, then the burden of disclosure falls — at least in part — on the bidders.

Many attorneys advise their auctioneer clients to waive, disclaim, and assign as much liability and responsibility that they can. There is no question that by providing the opportunity to inspect prior — even if not exercised — would help with that endeavor.

Further, many auctioneers tell me all the time that their stock and trade is honesty and trustworthiness, and I would agree that successful auctioneers are those who are honest and can be trusted. In other words, if this isn’t a Rolex watch … or it’s missing its workings, shouldn’t the auctioneer disclose such? Wouldn’t bidders be right to expect such behavior?

My observation is with “as is” sales, no disclosure, and no inspection opportunities auctioneers are driving bidders to shop elsewhere. In fact, it’s difficult to find any other retailer with such inequitable terms. What other retailer doesn’t have a pretty much a “no questions asked” return policy?

Of course, most auctioneers have no return policy either, further tilting the inequitable terms towards themselves and their sellers. I’m an auctioneer and I rarely shop at other auctions because the terms are generally horrible compared to my other shopping experiences.

However, in the many phone calls I receive every week from sellers and buyers, inequitable auctioneer behavior is often viewed as unfair, unreasonable and even unconscionable. When the dollar values reach $1,000,000 or more, it’s more often their attorney calls me.

Want to avoid court? Want to avoid litigation? Want to not need to call your attorney? Want to sleep better at night? It’s this simple: Be reasonable, be fair, be honest, be trustworthy and those might be dreams rather than nightmares.

Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.

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